Better Benchmarking: 1o Pitfalls to Avoid

January 22, 2019

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Traditional benchmarking was a lengthy process that might take nine months or more, and generally required multiple in-person site visits. By the time the study was complete, the organization’s priorities and processes may have shifted, making the carefully-gathered data less relevant and actionable.

While the internet has allowed organizations to gather data online and shorten that time frame considerably, it has also introduced some potential pitfalls. Recognizing the following ten biggest benchmarking traps can help you steer clear of them and keep your initiatives on the right track:

  1. Relying too much on web-based benchmarking information. Data reported on the web is not always accurate. It may not be current, or it may be presented in a confusing way. There's a lot of room for different interpretations, definitions and discrepancies in the data among different organizations. Following a balanced approach to benchmarking that includes your own research data obtained through questionnaires, for example, as well as making site visits as time permits, will make your results richer and more reliable and allow you to be certain you aren't comparing apples to oranges.
  2. Forgetting to set performance targets first. Know your niche and your business strategy before you begin benchmarking. Too many companies believe it's sufficient to just look at their industry's standard metrics and let those metrics drive their strategy. While it makes sense to benchmark industry averages regularly in order to set performance targets, you also need to develop measures that evaluate the things that make you different as a company.
  3. Treating benchmarking as a “one-off” initiative. Benchmarking is most effective when used as an ongoing process, not as a one-time event. Benchmarking on a regular basis enables your company to make smaller, more frequent, incremental changes rather than attempting larger, more sweeping changes, which can be highly disruptive. In addition, larger projects take longer to complete, which can compromise the relevancy of the results, particularly if the organization's strategies shift during the benchmarking effort.
  4. Attempting to go it alone. Many companies tend to bite off more than they can chew and end up wasting time and money collecting a lot of information that has little value to their bottom line. To stay on track, seek out a consultant with benchmarking experience. This expert can help you determine what you want to benchmark, and help you narrow your focus to only those things that support the company's main strategies.
  5. Dealing with dueling business models. Make sure the company you're benchmarking follows the same kind of business plan you're using. For instance, if a competitor has been able to reduce their turnaround time on a process, it may be because they've chosen to outsource that particular process. If you don't have that information, you may try to find ways to dramatically slash your own process time internally, with disastrous results. You need all the facts before trying to emulate a best practice idea you've gleaned from another company.
  6. Lifting and shifting somebody else’s whole process. Rather than looking at how one business performs an entire process, analyze which companies excel within different parts of that process. For example, one company may excel at the first step of the process, while another may excel at the final step. That deeper kind of analysis forms the basis for combining all the best procedures within the process being benchmarked. Just make certain the various steps gleaned from different organizations work together as a cohesive whole and aren’t at odds with one another.
  7. Failing to motivate employees. To make your benchmarking results “stick,” you need to create performance targets based on your results and tie employees' compensation to those targets. For instance, if your benchmarking results show that you need to increase your customer satisfaction ratings by 30 percent, tie employees' accountability and compensation to hitting that target.
  8. Overlooking the big picture. Don't limit benchmarking efforts to your own industry. Look at several industries to find where the best practices lie for a particular function or process. It also makes sense not to benchmark companies that have strategies different from your own. For instance, if you're cost-driven and the company you're studying is known for its innovation, you probably won't get much out of it.
  9. Failing to convince other companies to participate. One essential benchmarking challenge is convincing other companies, some of which may be your competitors, to participate in your benchmarking efforts. To promote participation, particularly from a competitor, let them help in the creation of your questionnaire. Your competitor may say, “If you add some questions about invoicing accuracy, then we'll participate in your project.” You may even need to create a marketing program touting the benefits a benchmarking partner may gain by participating.
  10. Failing to tie your efforts to financial results. Successful companies understand how they'll use the results to change the way they're doing business and how to get a quick ROI on their benchmarking investment by targeting quick-win opportunities. Track the amount of improvement each benchmarking initiative has on your bottom line.

Final Thoughts

Companies with successful benchmarking programs tend to take a balanced approach to process improvement. They collect data from both the web and consultants, as well as from face-to-face contact with participating partners. They don't work in a vacuum; they seek input from key constituents. They tie employee performance to benchmarking findings. And they seek out resources for information from a variety of sources, including trade associations. A number of trade groups put together networks that help ensure an effective comparison of companies in search of best practices. Trade groups have become clearinghouses of information suited to a specific industry or niche.

Remember that benchmarking doesn’t mean you have to do things precisely the same way other organizations do. The key is to fully understand your own unique processes and their weaknesses, and adapt other good ideas to help improve them. 

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